Time to clear all unsold luxury units

(File pix) The freeze means a temporary stop to the development of shopping malls, commercial complexes and luxury condominiums, of which each unit is said to be in the price range of RM1 million and above.

QUALITY, affordable housing is a key element of a strong and secure Malaysia. Hence, the government’s announcement of an indefinite freeze on approvals for luxury property developments is much lauded.

The cabinet has decided on this after studying a detailed Bank Negara Malaysia report published in June on the real-estate glut, said Second Finance Minister Datuk Seri Johari Abdul Ghani yesterday.

The freeze means a temporary stop to the development of shopping malls, commercial complexes and luxury condominiums, of which each unit is said to be in the price range of RM1 million and above.

With the numerous ongoing high-end property development projects, it is, therefore, not surprising that there is a gross oversupply of houses priced above RM500,000 and an undersupply of those below RM250,000.

That there is a lack of affordable homes in the market is also obvious, considering the 48 per cent demand for it, but supply only meets 28 per cent of that. Indeed, building luxury homes and commercial property is a highly profitable investment for developers and those who can afford them, but this should not be at the expense of a developing nation, where a growing number of people are not able to own homes.

Last Friday, it was reported that the central bank had highlighted the decade-high level of unsold residential properties, at 130,690 units, with 63 per cent of them priced above RM250,000 and 61 per cent of them being high-rise apartments. The latest unsold property figure is almost double the historical average of 72,729 units per year between 2004 and last year. Johor leads with the highest proportion of unsold units at 27 per cent, followed by Selangor (21 per cent), Kuala Lumpur (14 per cent) and Penang (eight per cent).

There is no one-size-fits-all solution to the challenges facing the housing industry, but for now, developers should make full use of the temporary freeze to clear the excess supply. A concerted effort must be made to reduce the prices of unsold high-end properties to an affordable range so that the units get sold. On the undersupply of affordable homes, perhaps, more incentives to encourage developers to build more of them.

The incentive may be a stimulus that can motivate developers to include a solution to control building cost, which can create a balance in the overall construction of affordable homes. Reportedly, developers are discouraged from building affordable homes because of high construction costs. It is indeed timely to announce the freeze, especially with the rise in the cost of living. There needs to be a halt to the many luxury property and commercial development projects, especially shopping malls.

As Bank Negara Governor Tan Sri Muhammad Ibrahim so aptly put, “there are far too many malls for a population of 32 million”. There is a saying: “Luxury is the enemy of growth, and an abundance of it is neither good nor healthy for the growth of a child’s mind”.

If it’s not good for a child, what more for a growing economy and a developing nation (on track to achieving developed status) like Malaysia.